RP Data analyst Tim Lawless says prices in Sydney have increased by 10 per cent in the first nine months of this year.

"What's driving that is the fact that Sydney's had a weak long-term cycle," he said.

"Over the past 10 years values have only risen by an annual rate of about 2.5 per cent. So in many ways Sydney's playing catch up at the moment."

Mr Lawless believes much of the concern about high growth in Australian house prices is centred on Sydney.

"It's being driven very much by investment," he said.

"Whereas first growth phase back in 2009 was very much driven by first home buyers, it's very different in this cycle and it's very much speculative. About 40 per cent of purchases in Sydney are investment properties."

But Mr Lawless says the annual increase of 5 per cent across all capital cities is fairly tame.

"We've seen much higher levels of growth in the previous growth cycles," he said.

"Back in 2009 for example, we saw annual growth peak at around 15 per cent to 17 per cent, in 2007 it peaked at about 20 per cent, and in 2001 it peaked at well above 20 per cent."

Prices in Darwin dropped by 2.5 per cent last month, while Hobart's average house price fell by 2 per cent.